[brtkdotse]

I cannot for the life of me understand why’d someone who’s not an institutional investor (say Buffet) would want to own stock in a company that doesn’t pay dividends. It’s basically buying a vanity plate and hoping someone else will buy it for more down the road.

[martin_bech]

Because taxes.. Warren has explained this himself many times. The US Tax system makes it better to have rising stock prices, than dividends.

[user234683]

I've had this question in the past and I found this post helpful:

> The fundamental answer to all of this is that the profits must be shared with shareholders at some point. This is what terminates the infinite regression. If a company believes that they can retain their earned profits to further grow and generate even more profits, they will do so. However if a company continues to grow and do well, eventually they will accumulate so much cash in the bank that they can’t find good use for all of it. At this point they will have to pay it out to shareholders through a dividend or stock buyback. If they refuse to, at some point the shareholders will band together and vote for new management that will pay it out.

https://stuffexplained.wordpress.com/2013/10/13/why_buy_stoc...

So even if the company does not pay dividends currently (reinvesting it instead), there will eventually come a point at which their growth flatlines, and they will start paying out dividends. If the market is rational, it will have forecasted this flatlining and the stock price will have taken that into account.

[evmar]

I used to have some trouble with this one but if you think about it it's the same as "why would anyone want a dollar, it's just a piece of paper". The answer is that for literally anything, if you can exchange the thing for value, then it effectively has that value.

(Or alternatively, you say that dollars are also vanity plates, and are as worthless as stocks.)

[AnthonyMouse]

It's because someone else does in actual fact buy it for more down the road more often than not.

[option]

if you think about it share buybacks are like dividends but with much better tax rate for investor